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Reform support team at the Ministry of Finance of Ukraine Annual Report

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Reform support team at the Ministry of Finance of Ukraine Annual Report

  1. 1. Reform Support Team Ministry of Finance of Ukraine Annual Report 2018
  2. 2. Today Ukraine is close as never before to join the international initiative for a transparent and equi- table payment of taxes. It was an honor for me to sign on behalf of Ukraine the Multilateral Instru- ment Protocol and now we are ready to carry on the implementation of the BEPS Action plan. A «single window» at customs was launched under the MoF supervision that accelerates the transit of goods through the border and facilitates all customs procedures. The next steps - an introduction of the authorized economic operator and automated information exchange system. It will reduce the risk of corruption and make a positive effect on the business climate. We have developed a new concept for cooperation with international financial institutions. Our aim is deregulation of the IFI’s projects preparation and implementation, simplification of project approval procedures, increasing in loan disbursements and acceleration of projects’ implementation speed. We also plan to launch an open register of IFI projects. Finally, the MoF has already begun to change corporate governance at state-owned banks - Oschadbank and Ukreximbank. This will improve the situation in the banking sector and boost the resumption of lending for Ukrainian business. We would hardly succeed without a reliable crew of the Ministry, an important part of which undoubtedly is the Reform Support Team. It was a very timely and sound decision of our distin- guished international partners to create RSTs under the main Ukrainian ministries. These teams do not only promote sectoral reforms but also are parts of comprehensive Public Administra- tion Reform, one of the crucial reforms for our country, that is in need of the efficiency boost of state bodies functioning. The RST provides analytical support, helps to address strategic chal- lenges and introduces more effective processes. They often not only become the ideologists of changes but also take the lead and responsibility for their implementation. Our main task for 2019 is to prepare first medium-term Budget Declaration, to implement the SFS reform and continue other structural reforms. It’s not an easy task in a year of double elec- tions and substantial payments on external borrowings. Nevertheless, I am convinced that we will not run off course of reforms and preserve a well-balanced budget, financial and fiscal policies. Oksana Markarova Minister of Finance of Ukraine Besides ensuring macroeconomic stability Ukraine in the last four years has also gone through major reforms in all spheres of life. Ukraine today is like a ship that has left an old harbour and being sent to new prosperous lands. The ship is not in the best shape, it faced a lot of hits. And we have to simultaneously repair it, adjust the course and set the sails. We have proceeded far enough, and let the critics say that we could have higher achieve- ments, but nobody can deny that we have done more than for the last decades. And the Ministry of Finance, as one of the key governmental bodies, is at the vanguard of the state flotilla. In 2018, the Verkhovna Rada adopted the law prepared by our Ministry that establishes a firm legal basement for the medium-term budgetary framework. This long-awaited step will help to ensure fiscal discipline by making more apparent the impact of current policies on the budget balance. We have unlocked the reform of the State Fiscal Service, and now we are beginning its reorgani- zation by dividing into two separate entities - the State Tax Service and State Customs Service, both subordinated to the MoF.
  3. 3. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Public Administration Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Public Finance Management and Social Reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Tax Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Customs Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Cooperation with International Financial Institutions . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . 27 State-Owned Banks Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Table of content
  4. 4. negotiations with stakeholders, and managing the initial work process. We are doing our best at each stage. Development of models and processes is no more important than direct work with MoF staff, usually for extra hours. Because not demonstrating your own example, you will hardly change the environment. This is the main difference between the new Ukraine Reforms Architecture from all the technical support projects that were before. Our task is not only to design a new system but also to successfully implement it, to combine our experience with the civil service practice. That is why main stream for the RST is the Public Administration Reform that implies a comprehensive change in how the MoF operates. The RST is on a daily basis involved in the process of strategic and operational planning of the Ministry’s activities, advising and assisting in the preparation of the legislation, analyzing foreign experience, communicating the reforms being implemented, negotiations with IFIs and other stakeholders. All abovementioned in order to introduce irreversible changes. To achieve the desired result we need the right people in the team. For past two years, after reviewing hundreds of prominent candidates, we have managed to gather a team of two dozen exceptional people. They all are professionals that have considerable experience in the entrust- ed areas of reforms and master the project management approach. In addition, they have something else that helps them stand against the resistance of the old system, the lack of the usual benefits of top managers positions, the critical perception of their work by those who are accustomed to condemn, but do nothing with their own hands. Neverthe- less, they continue to act with clear eyes, righteous ambition, and unwavering determination. In this report, you will find our main achievements in 2018. Lily Tomlin once said: “The road to success is always under construction”. We are still far from the finish line, but those who work hard - always make the difference. If we want a more effective and efficient public administration, we need to keep working for it. If we want policies that brings Ukraine to the top of world competitive ratings, promote busi- ness development, reduce corruption and ensure prosperity for everyone, we need to keep organizing the right people to develop them. If we want to see a better Ukraine, we need to build it together. Nataliya Slysh Director of the Reform Support Team Project Management Office at the Ministry of Finance of Ukraine At the end of 2016, inspired by Ukraine’s pros- pects on comprehensive reforms and Eurointe- gration, I, like many other believers in changes, decided that it is the time to get organized and make own contribution to the development of the country. I swapped the business to public sector and became a Director of the Reform Sup- port Team Project Management Office at the Ministry of Finance. The RST PMO is part of the Ukraine Reforms Architecture (URA) programme financed by the Ukraine Stabilisation and Sustainable Growth Multi-Donor Account (MDA). An Innovative con- cept of the programme has been developed jointly by the EU and EBRD to help unlock imple- mentation of the Public Administration Reform. The philosophy of RST establishment is to assist in filling the capacity gaps in the design and implementation of reform strategies at the Minis- try of Finance of Ukraine. Our two year experience has shown the vision alone is not enough. On the way of becoming a reform champion you cannot escape from transi- tional activities and not delivering routine tasks by yourself. It doesn’t matter which reform initiative we are talking about. All of it should include the method- ology development and framework establishment,
  5. 5. RST Organizational chart IFIs cooperation and State-Owned Banks Reform PAR and MoF capacity building Customs Reform Tax Reform Administrative assistance and communication PFM and Social Reforms Oleks andr Frantsysh ko Ievge n Mashyna Oksa na Kuznetsova Andri y Olefirenko Pavlo Ryabets Oksana Drozach Nat aliya Slysh Iev gen Kozlov Rom a n Goptsii Konst antin Penskoy Kater yna Bondar Oleks andr Chubukov Dmyt ro Sydorenko Valeri y Markhay Veron ika Proshuta Alexe y Ogienko Andri y Staroshchak Yehor Bielkin Olga G urzhiy Anna M ashyna Valeri ia Radchenko RST Annual Report 2018 3
  6. 6. Human Resources Strategic and Operational Planning Organisational Capacity Building IT Capacity Building Public Administration Reform 4
  7. 7. Organizational capacity building The RST helped to develop the MoF Order No. 841 on Project Management Framework for Strategic Planning Directorate, which was approved on 19 October 2018 The RST assisted the MoF in launching 4 pilot projects based on the project management approach – “MoF website 2.0”, “Electronic Document Management System”, “Citizens Budget” and “Reporting Framework” The RST supported the MoF during the setup of the EU4PFM program in implementing a quality management system, incl. reviewing the current MoF processes and procedures with recommendations issued to avoid overlaps and ensure alignment with strategic goals and operational processes The RST contributed to the improvement of communications and interdepartmental cooperation within the MoF by: Drafting a new communication framework consistent with the MoF mission, priori- ties and strategic goals Preparing a new framework for MoF cooperation with business associations Creating a “Green Office Initiative” concept note (the first phase of waste manage- ment started in November 2018) Drafting a new framework for internal digest Model 1 Model 2 Model 1 Change Management Commitee Model 1TM1 TM2 ... Workgroup Model 1TM1 TM .. Model 1TM1 TM2 TM2 ... TM2 TMn Project team CM1 CM2 ... Project owner Project owner Head of the project Head of the project Project Management Project Management Office Project Management Office Project Management control control control reporting reporting reporting coordination reporting management and control CM - committee member, TM - team member management and control coordination and control control Project Management Framework Embedded efficient and transparent business processes to enhance MoF planning and execution framework ImpactKey activities involved RST Annual Report 2018 5
  8. 8. Strategic and operational planning The RST helped the MoF to prepare and approve a new order on strategic planning and operational reporting – No. 352 of 7 March 2018. The RST played a leading role in the preparation and approval of the new MoF Strategic Plan for 2018-2021, incl. the MoF strategic goals (20). MoF Order No. 989 of 7 December 2018 The RST assisted MoF in starting a pilot project on the new version of Operational Plan, incl. strategic task performance monitoring (all MoF strategic goals were drilled down to consecutive stages with expected results at each stage) The RST was involved in the preparation of methodological recommendations for person- nel evaluation in line with the strategic and operational goals of the MoF The RST prepared the visualization of the MoF Strategic Plan in line with the best practic- es within the OECD, incl. English and Ukrainian versions Better strategic and operational planning that will help the MoF set priorities, focus energy and resources, strengthen operations, and ensure that employees are working towards common goals Strategic Planning Framework ImpactKey activities involved Government Action plan 2020 Strategic goals drill down to KPI and strategic plans of the Departments MoF Operational plan MoF Strategic plan Public Administration Reform Strategy Public Finance Management Strategy Mission: the implementation of public finance management to ensure sustainable economic growth, the effective provision of public services and the creation of incentives for reforms in other areas Memorandum with the International Monetary Financial Sector Reform Strategy Budget policy Fiscal policy Objectives: ensuring the predictability and balance of fiscal policy in the medium term and resource allocation in accordance with the priorities of state Implementation of medium- term budget planning Cost effectiveness increasing Program budgeting Ensuring sustainability, transparency and accountability of local budgets Fiscal risk management improvement Internal financial control development Tax system stability and predictability increasing Tax administration quality and efficiency improvement Expansion of the tax base Establishment of the Financial investigation service Enhancement of customs control Enhancement of tax compliance by taxpayers Internal control and corruption prevention Strategic planning and KPI system Public administration reform IT Strategy development and implementation Other Strategic goals Improving public debt sustainability and development of the domestic primary market of government securities Cash management improvement Reform of the state banking sector Accounting modernization in accordance with international standatds Objectives: construction of a modern fair tax system that ensures achievement of the strategic goals of sustainable economic development Objectives: ensuring the stability and reliability of the financial sector Objectives: minimization of cost and risks in meeting the needs of the government in financing and ensuring debt sustainability and availability of funds to Objectives: improving MoF institutional capacity and ensuring the implementa- tion of strategic tasks in the field of public finance management Financial policy Debt policy and liquidity management Capacity building + RST Annual Report 20186
  9. 9. Strategic Plan as it was Strategic Plan as is now RST Annual Report 2018 7
  10. 10. The RST prepared a second semiannual people survey and action plan on its implementa- tion, including a separate section regarding the working culture within the MoF The RST supported the MoF during the setup of the EU4PFM program in articulating a comprehensive HR strategy and HRM processes within the MoF (review and reorganiza- tion of the existing HR procedures, including procedures for staff recruitment, adaptation, structuring of typical work scopes for employees and competence profiles, staff assess- ment and evaluation, promotions, training needs assessment) The RST helped the MoF to approve a new internal order on trainings introduced (new application form, updated control process for training assignment) The RST facilitated the signing of a memorandum between the MoF and DTEK Academy (with regular soft skills training) Human resources management Ensured that all MoF personnel are committed to provide high-quality services by having the right people in the right positions, with the coherent skills and abilities and a true sense of personal value ImpactKey activities involved MoF personnel structure, 2018 Heads of Departments and Deputies 1% 80% 60% 40% 20% 0% Middle Management 10% 18% 71% Top Management Others* 24,7% male 75,3% female 12% 5% 60%6% 5%12% *incl. professional staff, administrative, non-executive Average age 41,5 years Average length of service at MoF by gender and position Middle management Other management positions Professional staff % 11,4 years RST Annual Report 20188
  11. 11. The RST helped the MoF to procure and implement an electronic document management system, including a detailed action plan, testing, etc. The system went live on 1 October 2018 The RST supported the MoF during the IT audit of the PFM sector (preparation of technical specifications, establishment of a special working group, etc.) The RST developed a concept note and new layout of the MoF website and Intranet portal. The support also included assistance in raising donor’s funds, drafting technical specifications, prototyping the new MoF website pages, etc. The RST analyzed the best practices in service desk implementation and prepared a framework of the MoF IT Service catalogue IT capacity building Enhanced capacity of delivering high-quality, reliable, secure information technology services, and providing forward-looking and comprehensive solutions that will boost the MoF efficiency MoF EDM process Information created by the user Technologies Classification Inflow Technologies Information created by the program Security Paper forms distribution Internet distribution Electronic interaction Archive Paper Electronic forms Financial Programs XML Optics NAS/SAN CAS Storage Inflow Processing Hosting Archive Storage Outsourcing Delivery Internal documents Image digitalization Electronic forms Web-forms Aggregation Index Categorization Accounts administration Digitalresourcesadministrati on Do cum entsadministration W eb -content administration Administration Internal Search Technologies Repositories Library Services Personalization XML Format Compression Public Keys Access rights administration XML Index Ar chive Back-up Offshoring Scan ImpactKey activities involved RST Annual Report 2018 9
  12. 12. 2018 2019 2020 2021 Public Finance Management and Social Reforms
  13. 13. New approaches to healthcare and education funding The RST assisted the MoF in preparing a project roadmap for a pilot project with the National Academy of Medical Sciences (NAMS) for test implementation of a tertiary healthcare system financing model that includes new provider payment mechanisms and contributed to the discussions with key stakeholders The RST facilitated the establishment and capacity building of a new unit on healthcare reform finances in the Humanitarian sphere budget expenditures Department of MoF The RST performed an overview of international practices of how to approach healthcare funding The RST carried out an assessment of ICT capabilities of the NAMS pilot project participants The RST provided analytic support to the MoF in analyzing the dataset on the tertiary healthcare capacity in the regions of Ukraine. The dataset included information from 25 regions of Ukraine with regard to over 950 unique specialized healthcare service types identified for the pilot project The RST helped the MoF come up with changes in the legislative framework on the pilot project (project prolongation, adoption of the new service nomenclature and tariffs) and analyze information on the calculated service tariffs In the field of education funding mechanism reform, the RST assisted the MoF with exami- nation of a proposed formula and analysis of a model for a new higher education funding mechanism Improved public expenditure efficiency in the fields of healthcare and education Patients Local Authorities Hospitals Treatment Contract Reporting Contract Payments / Reporting Contract Public procurer (NAMS) Private sector (insurance companies) Payments / Reporting Pilot Project Model ImpactKey activities involved RST Annual Report 2018 11
  14. 14. Development of a sound fiscal risk management system The RST developed a draft concept of fiscal risk management framework within the MoF based on the best practices in fiscal risk management The RST prepared technical requirements for the fiscal risk information backup within the MoF Inclusive fiscal risk management system to increase reliability of the budget policy, improve sustainability of the public debt and drive efficient allocation of public resources Fiscal risk management and coordination model MEDT MInsoc PFU SPFU SESU NBU NFSC DGF MoF Strategic planning DG Debt policy department Financial policy department Industry finance department Social finance department IFIs department FRD Monitoring Unit Recommendation 1 Recommendation 2 Recommendation n Target model Fiscal Risk Register presented (Fiscal Risk Assessment Matrix according to the priorities of the medium-term perspective). MoF units work closely with stakeholders on fiscal risk assessment and provide sufficient materials for analysis to FRD. The mechanism of MoF units interaction with regard to fiscal risk assessment and provision of recommendations to interested parties has been developed. Prepared templates and recommendations (guidelines) for fiscal risk assessment. Creation of the Fiscal Risk Management Committee (if needed) at the Ministry of Finance for making strategic decisions. Subordination is carried out directly to the Minister. Meeting are held quarterly. Transfer of non-specific functions of management of state enterprises: "Kyiv Offset Factory", "UzEMK", "Golovfinteh" to other MoF units. Current model There is no general methodology for disclosure and management of fiscal risks, assessing the impact of fiscal risks on the indicators of the State Budget, forecasting and mitigating the respective risks. Lack of institutional capacity. Fiscal Risk Department (FRD) has no competence (skills) and required expertise to analyze the information and prepare comprehensive reports. Ineffective communication. Responsibility for fiscal risk management is allocated among multiple departments within the Ministry of Finance The presence of non-specific functions. The FRD manages state-owned enterprises: "Kyiv Offset Factory", "UzEMK", "Golovfinteh". There are no common approaches to the quality of recommendations and the definition of the FRD "PRODUCT". Quantification, reporting, and mitigation of fiscal risks are not sufficient. MEDT MInsoc PFU SPFU SESU NBU NFSC DGF MoF FRD Recommendation 1 Recommendation 2 Recommendation n Strategic planning DG Social finance department IFIs department Debt policy department Financial policy department Industry policy department Revenue Forecasting department ImpactKey activities involved RST Annual Report 201812
  15. 15. The RST participated in sector-specific 2019 budgeting meetings with line ministries and agencies The RST was involved in horizontal spending review workgroup and assisted the MoF with preparation of the final report. The spending review was performed in 5 pilot ministries to identify possible savings and reduce inefficient expenditures The RST helped the MoF generate analytical reports and presentation materials Introduction of medium-term budget planning and program budgeting Increased efficiency and transparency of public funds allocation April 15 NBU MoF: updated profit indicators MEDT MoF: updated macro forecast Budget Calendar March 1 NBU MoF: indicative profit indicators MEDT MoF: indicative macro forecast MinSoc MoF: indicative social standards September 15 CMU Parliament: Draft Law on State Budget 2020 May 15 MoF CMU: draft Budget Declaration MEDT CMU: macro forecast July 14 Parliament’s decision on the Budget Declaration May 31 CMU Approves the Budget Declara- tion and the macro forecast for 2020-22 ImpactKey activities involved RST Annual Report 2018 13
  16. 16. The RST assisted the MoF in drafting by-law “On recalculation of pensions for persons retired from military service, and some other categories of persons” and provided analytic support during the discussions with the IMF The RST made relevant calculations on the pension reform progress in the course of preparation for the IMF mission visit Pension reform implementation Negative fiscal effect of Article 4 (“Pensions for persons retired from military service and their families”) of the Pension Law mitigated after the adoption of by-law for the implementation of pension reform ImpactKey activities involved The RST reviewed the best practices, legal aspects and characteristics of select- ed international audit oversight bodies The RST assisted the MoF in drafting orders related to the establishment and operations of examination commission for certification of auditors and exam regulation Implementation of recommendations made in the EU Directives Strengthened the independence of the Public Audit Over- sight Body and implementation of international standards ImpactKey activities involved RST Annual Report 201814
  17. 17. The RST provided analytic support to the MoF and assisted in preparing presentation materials related to the verification of social benefits Verification of social benefits Lower number of frauds and errors in social payments and increased efficiency in budget spending Verification of social benefits ImpactKey activities involved Social security administrations (local level) Public authorities and organizations, owners of personalized registries and databases Ministry of Finance VERIFICATION PLATFORM Information structuring and analysis Identification of anoma- lies, errors and suspicious infornation Reporting and monitoring Ministry of Social Policy and other authorities responsible for carrying out social benefits Real-time recipient’s data verification Recipient information Errors correction in databases Information about the recipients of social benefits Detected discrepancies, provision of recommendations Recommendations results report Obtaining information from various state registries and databases Information comparison and analysis Provision of recommendations RST Annual Report 2018 15
  18. 18. Tax Reform Counter- ing harmful tax practices more effectively Revamp the work on harmful tax practices with a priority on improving transparency, including compulsory spontaneous exchange on rulings related to preferential regimes, and on requiring substantial activity for any preferen- tial regime Countering harmful tax practices more effectively Revamp the work on harmful tax practices with a priority on improving transparency, including compulsory spontaneous exchange on rulings related to preferential regimes, and on requiring substantial activity for any preferential regime Countering harmful tax practices more effectively Revamp the work on harmful tax practices with a priority on improving transparency, including compulsory sponta- n Counter- ing harmful tax practices more effectively Revamp the work on harmful tax practices with a priority on improving transparency, including compulsory spontaneous exchange on rulings related to preferential regimes, and on requiring substantial activity for any preferential regime Countering harmful tax practices more effectively Re Counter- ing harmful tax practices more effectively Revamp the work on harmful tax practices with a priority on improving transparency, including compulsory spontane- ous exchange on rulings related to preferential regimes, and on requiring substantial activity for any preferential regime Countering harmful tax practices more effectively Revamp the work on harmful tax practices with a priority on improving transparency, including compulsory spontane- ous exchange on rulings related to preferential regimes, and on requiring substantial activity for any preferential regime Coun- Counter- ing harmful tax practices more effectively Revamp the work on harmful tax practices with a priority on improving transparency, including compulsory spontaneous exchange on rulings related to preferential regimes, and on requiring substantial activity for any preferential regime Countering harmful tax practices more effectively Revamp the work on harmful tax practices with a priority on improving tr Counter- ing harmful tax practices more effectively Revamp the work on harmful tax practices with a priority on improving transparency, including co Implementation of BEPS recommenda- tions Development of a concept of asset voluntary disclosure campaign State Fiscal Service reform Introduction of an Exit Capital Tax Tax clarifications on most critical inconsistencies in tax legislation
  19. 19. Implementation of BEPS recommendations Minimized opportunities for aggressive tax planning through low-taxed jurisdictions The RST was actively involved in the NBU Working Group on the development of a con- cept of BEPS Action Plan implementation The RST took lead at the Working Group in drafting a law on the implementation of the BEPS Action Plan The RST drafted the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI), which was signed in July 2018 Prevent treaty abuse Develop model treaty provisions and recommen- dations regarding the design of domestic rules to prevent the granting of treaty benefits in inappro- priate circum- stances Mandatory for Ukraine (minimum standard of the BEPS Action Plan) Аctio n 5 Аcti on 6Аcti on13Аctio n 14 Countering harmful tax prac- tices more effectively Revamp the work on harmful tax practices with a priority on improving transparency, includ- ing compulsory spontaneous exchange on rulings related to preferential regimes, and on requiring substantial activity for any preferential regime Making dispute resolution mechanisms effective Develop solutions to address obstacles that prevent countries from solv- ing treaty-related disputes under MAP, via a minimum standard in this area as well as a number of best practices. It also includes arbitration as an option for willing countries Re-examine transfer pricing documentation Develop rules regarding transfer pricing documentation to enhance transparency for tax administration, taking into consideration the compliance costs for business Minimum Standards of the BEPS Action Plan ImpactKey activities involved RST Annual Report 2018 17
  20. 20. Introduction of an Exit Capital Tax Improved investment climate and simplified tax administration The RST assisted the MoF in updating calculations of the effect of exit capital tax on the State budget The RST prepared numerous analytical papers on the assessment of exit capital tax intro- duction in different models and supported the MoF in developing and discussing the adjusted fiscally neutral model with the IMF Development of a concept of assets voluntary disclosure campaign De-shadowing of economy The RST provides its recommendations and was actively involved in the NBU Working Group on the development of a concept of assets voluntary disclosure campaign and law-making Exit Capital Tax ExitCapitalTax Deemed dividends20% 15% Payment of dividends Interest paid in favor of non-resident related parties Payments under insurance or reinsurance contracts in favor of non-resident insurers (in some cases) Payment of financial aid to the non-payer of the ECT, not returned within 12 months (with the right of refund upon return of the aid) Purchase of goods and services from related parties those using the simplified taxation system Transfer pricing differences Free-of-charge transfer of assets to non-payer of the ECT Investments to non-residents (with the right of refund after withdrawal of the investment) Royalty payments to non-residents (in some cases) Payments to non-resident companies Payments to non ECT-payers ImpactKey activities involved ImpactKey activities involved RST Annual Report 201818
  21. 21. Tax clarifications on most critical inconsistencies in tax legislation Elimination of inconsistences in tax legislation The RST proactively supported the MoF with drafting of 15 tax clarifications at their further discussion at the Expert Council, which were issued by the MoF in 2018 Tax clarification issued ImpactKey activities involved RST Annual Report 2018 19
  22. 22. Support with ongoing tasks Assistance to the MoF with performance of ongoing tasks The RST actively participated in discussion of the draft legislation on amendments to the Tax Code with various stakeholders that was required to meet parameters of the State budget to ensure Ukraine is eligible for the next IMF program The RST prepared numerous materials for meetings of MoF officials with business associ- ations, Parliamentary Committee, IMF representatives, etc. The RST assisted the MoF staff with analysis of more than 30 disputable tax issues during 2018 and provided necessary technical position for further decision-making by the MoF The RST presented the MoF approved position on tax issues at different conferences and fora State Fiscal Service reform Improved efficiency of the State Fiscal Service (SFS) The RST provided support to the MoF in developing a concept paper on the SFS reform that outlines the principles and milestones of its transformation into a modern service organization to effectively collect and enforce taxes The RST analyzed different aspects of possibilities and limitations posed by the SFS reform ImpactKey activities involved ImpactKey activities involved RST Annual Report 201820
  23. 23. Harmonization of the Ukrainian and the EU legislation, including the implementation of the new EU Customs Code Implementation of Authorized Economic Operator Implementation of the Convention on a Common Transit Procedures and NCTS Improvement of the “single window” concept Development of an action plan on implementation of the EU Customs blueprints, SAFE Framework of Standards of the World Customs Organization and Trade Facilitation Agreement Customs Reform
  24. 24. Implementation of the Convention on a Common Transit Procedure and the New Computerized Transit System (NCTS) into Ukrainian legislation Increased efficiency of controlling procedures for transit goods through application of the EU practices of placing, ending and discharging transit operations and usage of the EU standardized IT tool (NCTS) Wider use of electronic documents for the customs procedures and control operations (including electronic guarantees) Enhanced financial guarantee market and new opportunities for Ukrainian guarantors on the EU/EFTA markets Improved exchange of customs-related information between Ukraine and additional 24 countries (with 35 countries after introduction of NCTS vs 11 countries at present) The RST supported the MoF and SFS in amending the Roadmap of Ukraine's accession to the EU/EFTA Common Transit Procedure, getting it endorsed by the EU experts (with the support of the EU Delegation to Ukraine) and holding discussion during the 3rd meeting of the UA-EU Association Committee in Trade Configuration The RST facilitated the negotiations on the configuration of Ukraine’s accession to the EU/EFTA Common Transit Procedure between the MoF and European Commission’s experts The RST led the process of developing comprehensive draft laws “On Integrated Transit Regime” to implement provisions of the Convention on a Common Transit Procedure, its discussion with and endorsement by the EU experts and other stakeholders. As a result, one third of the draft law has been already endorsed by the EU experts with the remain- ing parts expected to be cleared in early 2019 The RST supported the MoF and SFS in drafting by-laws coming from the test mode of applying T-1 transit declaration adopted by the Parliament (Law of Ukraine No. 2530-VIII of 6 September 2018) ImpactKey activities involved RST Annual Report 201822
  25. 25. Implementation of Authorized Economic Operator (AEO) in Ukraine Increased efficiency of controlling procedures from both business and customs authorities sides by, inter alia, enhancing electronic exchange of information and applying risk analysis system Ensured compliance and law-abiding, free will and timely payment of customs duties as a trend Enhanced financial guarantee market and new opportunities for Ukrainian guarantors on the EU markets The RST supported the MoF in developing the assessment methodology for AEO appli- cants The RST provided support to the MoF in analyzing the EU experts’ comments to draft law on AEO No. 7473 of 27 December 2017 and facilitating communication during all follow-up discussions and mailings. As a result, the draft law on AEO was endorsed by the EU experts ImpactKey activities involved RST Annual Report 2018 23
  26. 26. Harmonization of the Ukrainian and the EU legislation, including the implementation of the new EU Customs Code Implemented provisions of the EU Regulation No. 608/2013 of 12 June 2013 concerning customs enforcement of IPR Implemented provisions of the Council Regulation (EC) No. 1186/2009 of 16 November 2009 concerning customs duty reliefs Implemented provisions of the Union Customs Code, its implementation and delegated acts The RST led the process of developing amendments to draft law No. 4614 of 6 May 2016 to implement provisions of the EU Regulation No. 608/2013 of 12 June 2013 concerning customs enforcement of IPR, arranged its discussion with and endorsement by the EU experts. As a result, the amended draft law was cleared by the EU experts The RST contributed to the development of a draft law on changes in the Customs Code regarding the implementation of the Council Regulation (EC) No. 1186/2009 concerning customs duty reliefs. The draft law is still under discussion with the EU experts The RST led the process of developing amendments to the Customs Code of Ukraine to implement provisions of the Union Customs Code. As a result, the basic provisions were developed, but need to be discussed with the EU experts. The project seeks the EU experts’ support provided within the EU4PFM program ImpactKey activities involved RST Annual Report 201824
  27. 27. Improvement of a “single window” concept in the harmonization of the non-tariff measures for imported/exported goods according to TARIC Introduced “single window” concept – a facilitation IT tool – that will allow parties involved in trade and transport (i.e. customs and other border control authorities, declarants, etc.) to lodge stand- ardized information and documents with a single entry point to fulfil all import, export, and transit -related regulatory requirements The RST supported the MoF in introducing a "single window” concept for imported goods and harmonizing the non-tariff measures for imported/exported goods according to TARIC The RST helped the MoF in analyzing the international practices and an appropriate list of documents for the performance of other border control procedures and checks Draft law No. 7010 (improving the “single window”) was adopted by the Parliament on 6 September 2018, and signed by the President on 29 September 2018 as Law No. 2530-VIII. The RST supported the MoF in communicating the adoption of the legislative changes The RST contributed to the development of amendments to the CMU Resolution and MoF Order classifying the documents in connection with the adoption of Law No. 2530-VIII of 6 September 2018 regarding the “single window” concept ImpactKey activities involved RST Annual Report 2018 25
  28. 28. Development of an action plan on implementation of the EU Customs blueprints, SAFE Framework of Standards of the World Customs Organization and Trade Facilitation Agreement Over the last 6 years after the tax and customs authorities had been merged the SFS capacity of fulfilling its functions of the State customs security has been insufficient. The project is aimed at building institutional capability of the tax and customs authorities based on the world’s best practices in carrying out controlling roles The RST was involved in the development of an action plan for the Concept of Customs Reform to apply the agreed changes and embed the world’s good practices in customs The RST supported the MoF in developing recommendations on the SFS reform, a con- cept of institutional structure of the tax and customs authorities and Conceptual Priori- ties of the SFS Reform Training of the customs officials 2020 2021 2022 Association Agreement between Ukraine and the EU 2018-2019 Local operational testing of the CCTP and NCTS Assessment mission by the EU experts Accession to the CCTP Testing transactions with the CCTP Contracting parties Developing of the Draft Law Developing of the secondary legislation Testing of the IT-tools (NCTS) Accession to the CCTP: general timeline ImpactKey activities involved Assessing the requirer IT-tools for launching the NCTS RST Annual Report 201826
  29. 29. Cooperation with International Financial Institutions
  30. 30. The international financial cooperation Embedded efficient and transparency in cooperation with International Financial Institutions The RST assisted the MoF in upgrading an IT tool for monitoring of IMF task execution The RST conducted an analysis and prepared support materials for the MoF regarding the Ukrainian project portfolio of the Black Sea Trade and Development Bank and other Member states The RST assisted the MoF in preparing the Concept Proposal on improvement of IFI sovereign and sub-sovereign projects implementation, approved by CMU 27 December 2018 The RST was actively involved (together with the MEDT, World Bank and AIFCP Office) in the preparation of a new action plan for the 2018-2020 SME Strategy ImpactKey activities involved Establishment and functioning of the national management and monitoring system for the implementation of joint operating programs of border cooperation – European Neighborhood Instrument 2014-2020 Enhanced efficiency of expenditure verification procedures The RST participated in the development of the MoF order in relation to the long list selection of an independent auditor The RST drafted amendments to the CMU Order No. 554 on implementation of national control and management system upon CBC ENI 2014-2020 joint operational programs realization dated 11 July 2018 The RST analyzed “Guidelines on expenditure verification” (Black Sea Basin Program) for future implementation ImpactKey activities involved RST Annual Report 201828
  31. 31. Development of recommendations on loan portfolio optimization Improved efficiency in monitoring of project implementation supported by IFIs The RST conducted an analysis and prepared presentation materials for the MoF meet- ings with high-level working group representatives of IFIs The RST assisted the MoF in analysis of legal changes needed to improve the level of disbursements and increase IFIs project utilization limits The RST contributed to the preparation of a draft concept proposals for the MoF to further cooperation with IFIs, in particular EIB, EBRD, and KfW IFIs portfolio disbursement level 15 8 8 3 IFIs portfolio projects Portfolio amount Portfolio disbursement* *as of December 1, 2018 (calculated for active projects only) ImpactKey activities involved 5,3bn 15,6% 27,0% 48,2% 4,9% 2.4bn EIB WB EBRD KfW EIB WB EBRD KfW USD EURO RST Annual Report 2018 29
  32. 32. State-Owned Banks Reform
  33. 33. Change of the Corporate Governance model in SOBs Increased transparency, integrity and efficiency of running SOBs The RST helped the MoF draft amendments to Article 7 (“Corporate Governance”) of the Law "On Banks and Banking” The RST participated in the Parliamentary Committee meetings regarding the new draft law No. 8331-d (update of No. 7180) The RST in close cooperation with the MoF Financial Policy Department set up a working group involving representatives of the EBRD, IMF, and World Bank for the implementation of Law No. 8331-d The RST assisted the MoF Financial Policy Department and IFIs developed: a detailed roadmap (weekly basis) for the implementation of Law No. 8331-d and got it endorsed by the EBRD, IMF, and World Bank selection criteria to short-list recruitment companies for the selection of Supervi- sory Board members and got them endorsed by the EBRD, IMF, and World Bank a regulation on selection of recruitment company for SOBs Supervisory Board selection requirements for members of the Selection Commission for the selection of Super- visory Board members in SOBs and submitted them for consideration of the Government a regulation on the Supervisory Board selection process in SOBs Supervisory Board profiles and 18 individual profiles for Supervisory Board inde- pendent members of Oschadbank, Privatbank, and UkrEximbank KEY COMPETENCIES OF THE SUPERVISORY BOARD Corporate and Small and Medium Business Development Payment Systems IT and Innovations (digital, big data, cybersecurity) NPL resolution, Risk Management, Compliance Operational Efficiency Strategic Management and Business Development Corporate Finance Financial Reporting and Audit Electronic communication channels Change Management Key Competencies of the Supervisory Board ImpactKey activities involved RST Annual Report 2018 31
  34. 34. Ongoing communication on the progress of reforms RST Annual Report 201832
  35. 35. The Reform Support Team at the Ministry of Finance of Ukraine (MoF) is funded by the Ukraine Stabilisation and Sustainable Growth Multi-Donor Account (MDA) managed by the EBRD. The contributors to the Ukraine MDA are Denmark, the European Union, Finland, France, Germany, Italy, Japan, the Netherlands, Poland, Sweden, Switzerland, the United Kingdom and the United States of America.

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